Well here we are sitting and waiting in anticipation to what the election result will be and what consequences will it have on our lives and economy.

Based on multiple financial research pieces and historical data, there are a few simple conclusions that we need to keep in mind.

1. There will be short term market volatility no matter who wins. Financial markets dislike uncertainty – political uncertainty is no exception. While we may experience some eye-catching headlines and elevated levels of volatility in the weeks ahead, history provides compelling evidence that long-term investors shouldn’t concern themselves with the outcome of any one election.
2. Presidents are not the stock market. It’s the executives running companies, making decisions on what projects and investments to make, that have a larger impact on investment returns than who is in the White House. While the candidates and hot-button election issues will always be different, the long-term performance of the market is remarkably similar.
3. Business 101 is revenues minus expenses. New governments bring with them their own political agendas. However, assuming this will drastically impact the direction of stock prices oversimplifies the complexities of the market which largely hinge on corporate revenue and earnings.
4. Democrats winning is not economic bad news- necessarily. Historically, presidential election outcomes have delivered surprising results when it comes to equity market performance, defying the “common wisdom” that they perform better under Republicans due to policies such as lower corporate taxes and less regulation.

Below are some interesting charts that look at stock market returns by presidents, parties, and government control.

I have said this before, the important aspect in asset management is that you are selecting high quality investments, continuously rebalancing your investments, and monitoring your portfolios daily. This is only possible if you have a professional team of investment analysts and portfolio managers.

Happy voting to our American neighbours!

Best,

Najia

 

Source: Forbes, Aug. 18, 2020